Search results for

Market volatility dominated the week and put a damper on the new issue market with only $2.9 billion in new deals being priced. With investors focused on the volatility in Tyco, WorldCom, Household Finance and other benchmark corporate bond borrowers there was little appetite for BBB names or risky names. In fact, Computer associates (Baa1/BBB+) pulled a plan deal from the market when Moody's put the companies rating on watchlist for a downgrade. That said, there appears to be money to put to work for very high quality borrowers as shown by the $400 million 10-year deal for AA rated Kimberly-Clark, which was sold in less than an hour. Emerging markets had a rare debut borrower as Peru (Ba3/BB-) came to market with $1.43 billion 10-years priced at +455 basis points over Treasuries. About $500 million of the new deal was for cash and the rest was used for liability management to retire Brady bonds. The cash portion was significantly oversubscribed with a reported $1.7 billion in demand.

Allied Irish Bank's surprise announcement last week that a rogue foreign exchange trader had racked up $750 million in losses, has European bank analysts worried that spreads will widen dramatically throughout the sector. Just after the losses were announced, AIB's tier-one bonds widened by roughly 45 basis points to 200 basis points over German bunds. "There is a risk of contagion to firms closely associated with investment banking and with derivatives trading exposure," says Olivier Szwarcberg, a banking analyst at Bear Stearns in London. As of last Thursday however, only a few banks had been affected. Bonds of Standard Chartered widened out by 10 basis points, while Fortis Bank and Bank Of Ireland were trading up to 12 basis points wider at LIBOR plus 166 and 156 basis points, respectively.

Allied Holdings has received commitments for a $202 million revolving credit line to refinance its expiring credit facility and address its subordinated debt obligations set to mature in February 2003. "We wanted to put in place a facility that would allow us to refinance both the bank debt and the subordinated debt by using our subordinated collateral base to secure borrowing," said Dan Popky, senior v.p. finance and cfo for Allied. The credit will be led by Ableco Finance and Foothill Capital, covering $173.5 million of the line. The remaining $23.25 million will be provided by existing bondholders. Popky declined to comment on pricing on the deal, which is expected to close later this month.

Collateralized loan obligations comprised of middle-market loans from bank portfolios, a rare sight to date, could amount to billions of dollars this year as banks in the U.S. and abroad look to remove the balance-sheet risks through either synthetic or cash-flow structures. With the Bank for International Settlements increasing pressure on banks to understand credit, and many of the larger loans now off the balance sheet, bank credit officers are turning their attention to the middle-market loan portfolio, explained Jeremy Gluck, managing director at Moody's Investors Service. The big area for potential growth is banks securitizing their own middle-market loans, he stated, whereas in the past independent managers have been the active players.

Bank One Capital Markets is readying its first European structured investment dollar- and euro-denominated medium-term note programs as well as commercial paper programs in both currencies. Ultimately, the SIV will reach a capacity of $20 billion, says Jim Irvine, managing director and head of structured investment vehicles in London. The SIV, called White Pine, will manage its interest-rate and foreign exchange exposure through swaps. The swap counterparties have not yet been selected, but Irvine says they must be rated at least A- long-term or A1 short-term.

Alison Falls, director of research and chief credit strategist for Banc of America Securities, has retired after 22 years at the firm. She did not return calls left at her home in Ohio. Falls reported jointly to Tom White, global head of high-yield trading, sales, and research in New York, and Jim Kelligrew, head of global high-grade fixed income in Charlotte, N.C. White says the firm will be naming her replacement within a few days. He would not comment on whether the firm was considering someone from outside, but said "we have several very talented people internally who we are considering for her role." In the interim, Michael Johnson, a principal, has taken over Falls' investment-grade strategy responsibilities. Ali Balali, also a principal, has been leading high-yield strategy and overseeing the Banc of America Large Cap high-yield index that Falls developed. Johnson and Balali are believed to be candidates to replace Falls, possibly as co-heads. They referred questions regarding their present and possible future roles to Kelligrew and White.

A group of bondholders has formed a committee that has hatched a plan to seize control of the restructuring negotiations surrounding financially distressed Dutch cable operator United Pan-Europe Communications, from its parent, UnitedGlobalCom (UGC), says a member of the committee. The bondholders, representing some $2.2 billion of $5.5 billion in outstanding high-yield bonds, formed the five-person committee last week. Early this week, the committee will appoint a financial advisor who will seek a strategic investor to pay down a E1 billion exchangeable loan held by UGC. The committee-member says he expects UGC to use the loan, along with its one-third share of UPC's bonds, to gain a disproportionate stake of the equity in a planned debt-for-equity swap. Eliminating the loan would shift the equity balance to the bond holders. The committee member says that if negotiations fail and UPC goes into receivership, a court-appointed trustee will allow the payment of the loan as it will be in the interest of the bondholders.

A buy-side and sell-side analyst are divided on whether Lyondell Chemical Company's planned purchase of Occidental Petroleum's 29.5% stake in Equistar Chemicals will benefit Lyondell bondholders. And, in an unusual turn of events, it is the sell-sider who is the bear. "Because any significant decrease in Lyondell's debt depends on an increase in Equistar's currently depressed levels of profitability, which may be a long time in the future, I'd not be buying bonds on this news," says Mark Hughes, head of European high-yield research at BNP Paribas. He argues that, given the almost six times leverage on a senior secured basis, Lyondell's 9.875% notes of '07 (Ba3/BB) should be bid at 95.625. Last Tuesday, they were some four points higher, at a 99.5 bid, two points higher than they were before the deal was announced.

The investment-grade market is churning out two big-name deals as a potential $4 billion credit for Hewlett-Packard Company launches at the end of this week and a $2.5 billion refinancing for Walt Disney is already in the market. Citibank/ Salomon Smith Barney has a hand in both loans, leading the H-P deal with J.P. Morgan.

Computer Associates has put on hold plans to refinance approximately $2.5 billion in debt, following a Moody's Investors Service review that put the software and information technology provider on watch for downgrade. The Moody's decision surprised and disappointed CA, which was hoping to take advantage of low interest rates to complete the financing, said a CA official. CA is echoing concerns of other corporations the ratings agency is being overzealous following the Enron debacle.

Credit Suisse First Boston and Citibank are preparing a $350 million acquisition credit for St. Louis-based Express Scripts, backing the company's acquisition of New Jersey-based National Prescription Administrators. The total purchase price for the acquisition is $515 million, with cash on hand and a share issuance contributing the remainder, according to a banker. The credit is a $350 million, six-year "B" loan, but it could not be determined what deal the new tranche was being tacked on to. Pricing and timing of a bank meeting had not been determined by press time last week.

CIBC has become the first offshore borrower to access the Singapore market with a new transaction this year, by launching a S$100m three year bond via Barclays Capital. The issue marks CIBC's debut in the Singapore market. "The transaction has been priced fairly against benchmarks," said a banker at Barclays. "There have been a lot of different buyers in the market for short dated bonds, and we saw participation from treasury accounts, corporate buyers and some asset managers." He added that a day after launch, 75% of the transaction had been sold to local investors.